Dairy Market: GDT auction prices fall 3.9%

Powder pulled Tuesday’s Global Dairy Trade lower again, as the world falls to its knees from coronavirus, COVID-19.


The weighted average of products offered dropped 3.9% Tuesday, following the 1.2% drop on March 3, 2.9% on Feb. 18, and 4.7% plunge on Feb. 4.


Skim milk powder led the declines, down 8.1%, followed by whole milk powder, down 4.2%, after declines of 3.2% and 0.5% respectively March 3.


Lactose led the gains, up 4.9%, and GDT Cheddar was up 2.6%, after it dropped 4.7% last time.


Rennet casein and anhydrous milkfat were both up 1.0%, after the milkfat slipped 1.7% last time. Butter inched up 0.3%, following its 1.0% rise in the last event.


FC Stone equated the GDT 80% butterfat butter price to $1.8341 per pound U.S., up 0.6 cents from the last event. CME butter closed Tuesday at $1.74.


GDT Cheddar cheese equated to $1.9950 per pound, up 5.1 cents, and compares to Tuesday’s CME block Cheddar at $1.8725.


GDT skim milk powder averaged $1.1462 per pound and compares to $1.2460 last time. Whole milk powder averaged $1.2687, down from $1.3389. CME Grade A nonfat dry milk closed Friday at $1.0050 per pound.


Pressured prices

People aren’t seeing much green on Wall Street at least on St. Patrick’s Day, thanks to the virus. Starting with a look back, Cheddar block cheese closed “Friday the 13th” at $1.8725 per pound, up 12.25 cents on the week and 31.25 cents above a year ago.


The barrels fell to $1.41 last Monday, the lowest price in 12 months, but finished Friday at $1.50, up 2.25 cents on the week, 0.75 cents above a year ago, but at an enlarged 37.25 cents below the blocks.


Monday and Tuesday’s trading left the cheese at Friday’s closes, as traders watch the headlines and anticipate Thursday’s February Milk Production report.


Midwestern cheese producers report generally steady, if not tepid, cheese demand, according to Dairy Market News, and some say coronavirus issues are not directly affecting cheesemakers. There are concerns and or expectations of food service requests lessening but retail demand could improve, as more people stay home. Cheese inventory ranges from growing to long.


Milk is available and the volume of offers has increased but the mid-week price range was similar to previous weeks. Cheese market tones are far from steady, says DMN.


Western cheesemakers say demand has been steady. Retail orders are strong but food service has been a bit slower. With an abundance of milk, cheese plants are running near full capacity.


Butter closed Friday at $1.8125, down 4.25 cents on the week and 46.75 cents below a year ago.


The butter shed 4 cents Monday and 3.25 cents Tuesday, melting down to $1.74, still 4.5 cents above where it was three weeks ago.


Butter producers report more promising demand tones and spring holiday demand expectations are beginning to come to fruition. Butter production is moderate to busy, depending on the producer and the region.


Cream is still readily available but ice cream production increases have begun to claim some of that cream. Butter markets have seen improvements; however, coronavirus has most DMN contacts questioning expectations of all markets, including butter.


Western retail butter orders are slowly coming off the last two weeks' peak demand period caused by the coronavirus outbreak. Food service sales are down as people avoid going to crowded public places. Cream availability has tightened due to ice cream production but churning is active. The next holiday is just around the corner.


Price erosion returned to nonfat dry milk which saw a fair amount of product head to Chicago. It fell to $1.05 per pound last Thursday and closed Friday at $1.0525, down 6.25 cents on the week but still 8.5 cents above a year ago; 47 loads traded hands on the week, up from 38 the previous week.


Monday’s powder was down 2.75 cents and it lost 2 cents Tuesday, dipping to $1.0050, lowest since April 22, 2019.


CME dry whey closed Friday at 34.75 cents per pound, unchanged on the week but 2.75 cents above a year ago.


The whey lost 2.25 cents Monday and stayed put Tuesday, holding at 32.50 cents per pound.


COVID-19 taking toll

It was Jan. 30 that the World Health Organization declared coronavirus a global health emergency. First identified in Wuhan, Hubei Province, China, the virus now known as COVID-19 was declared a global pandemic by the WHO.


Wall Street saw its worst slide since the Black Monday crash of 1987 on March 12 and you only need to read the headlines to see the many other consequences of this outbreak. President Trump addressed the nation over it and banned travel to and from most of Europe for 30 days, and the CME announced that it would close its trading floor.


Dairy prices have come under pressure as schools close and restaurant traffic lessens. However, FC Stone dairy broker Dave Kurzawski said in the March 16 "Dairy Radio Now" broadcast that early estimates of the impact have been scrapped, as the situation is “very fluid and changing hour-to-hour almost, so trying to guess the final result is probably a fool’s errand.”


He agreed that the outbreak may be problematic for fluid milk sales and falling restaurant sales will impact butter sales. However, “People are not going to stop eating.”


Recent weekly cheese and butter sales are up, he said, and “I know we keep hearing about hand sanitizer and toilet paper, but folks are buying food as well and they’re buying dairy products.”


Those sales may be being pulled forward and perhaps, two or three weeks from now will we hear demand has slowed, but he added a significant thought.


“Ten years ago, if this had happened, anybody sitting at home would have ordered a pizza, and I think we will see a spike in pizza sales, but now you have Grub Hub, Uber Eats, Door Dash, and all these different companies, you can order a steak if you want or you can order a cheeseburger.”


He admits that we will lose some sales and prices have already reflected that. Class III futures from peak to trough are down about 15%, according to Kurzawski, and Class IV prices are down about 17% “and there may be more downside to come but I don’t believe demand is going to curl up and die here.”


China opens

The U.S. Dairy Export Council announced last week that China has granted “at least a half-dozen tariff exemptions” for U.S. importers on a range of products, including skim milk powder, whey powder, lactose, whey protein concentrate and cheese.


The March 6 Dairy and Food Market Analyst reported that the concession “comes after China announced last month that it would exempt about 700 products from trade war tariffs. Cheese was not on the previously announced tariff exemption list, which suggests China may be willing to remove trade war tariffs on all American dairy products and has, in effect, ended the trade war on U.S. dairy,” says the DFMA.





From: Capital Press

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